alt.legal: Legal Innovation Is NOT Just Legal Technology -- How Adherence LLC Built a Niche  

Let's meet two former Biglaw attorneys who built a new business (and business model) to help a underserved client segment -- without writing any new computer code.

Joe Borstein and Magdalen Reeder (photo by Josh Klausner)

Joe Borstein and Magdalen Reeder (photo by Josh Klausner)

Happy New Year to all who strive to make the legal system work better! I’m back from my honeymoon, and could not be more excited for another year of introducing you to the people on the bleeding edge of legal innovation (if you are one of those people, please contact me)!

Today, we’re going to meet two former Biglaw attorneys who built a new business (and business model) to help a underserved client segment — without writing any new computer code. Thanks to the very gracious help of my colleague Christy Weisner (former Mayer Brown associate turned legal outsourcing guru), alt.legal connected with the founders of Adherence LLC.

But, before we start the show, allow me to frame why the success of Adherence is important to all you budding legal innovators out there. In 2015, this column covered over a dozen alternative legal companies, and almost all of them were pioneering new technology (this was not by design). While legal technology is super exciting and poised for growth, innovation comes in many forms (e.g., better work flows, better processes, improved training, and lower cost resource allocation), any of which can bring value to your clients and put money in your pockets.

Your authors’ industry (legal process outsourcing or “LPO”) is a great example: LPO was designed to provide clients with HIGHER quality legal support services at a dramatically LOWER cost (win-win). It did this with better work flows, improved training and quality controls, and utilization of globalized, lower cost resources — all without the need to create new technology. Fast forward a decade, and these innovations are now part of an industry generating over $1 billion a year (and growing), while saving the legal system billions more.

Now back to our regularly scheduled program: Adherence’s founders, Jane Shahmanesh and Saleemah Ahamed, saw inefficiency in how the traditional practice of law and law firm business model served a growing client segment, so they built a new model to correct it. They both practiced in Biglaw (at Shearman & Sterling and McGuireWoods), as well as in-house (at American Express, Goldman Sachs and other big-name financial institutions) before going out on their own. They now service smaller hedge funds and broker-dealers through a unique model discussed in depth below.

They bring new hope to those non-techies legal innovators everywhere. Enjoy Christy’s interview below.

Sponsored

Christy Weisner: What exactly is Adherence LLC?

Jane and Saleemah: Adherence is not a law firm, but a professional services firm that provides regulatory advice to private funds and broker-dealers.

On the compliance front, we offer outsourced compliance services that range from acting as our clients’ Chief Compliance Officer (and being named on the regulatory filings with the SEC and/or FINRA), to simply doing the work a fund’s CCO simply can’t do (or just doesn’t want to do). In essence, on the compliance side, we become an integrated part of the client’s firm by acting as their virtual compliance department.

On the legal front, Adherence — through its affiliated law firm — acts as outsourced General Counsel. Like the outsourced compliance work, the outsourced General Counsel does all of the work that a private fund or broker-dealer in-house counsel would do — but we aren’t on-site.

Furthermore, rather than utilizing the traditional law firm’s partner/associate hierarchy we use ONLY very seasoned people for our clients. The client “experience” is one contact with a partner-level person.

Sponsored

Compared to traditional law firms, we also price innovatively, using project-based pricing. We learned from our previous careers as in-house counsel to major financial institutions like American Express and Goldman that clients want fixed fees and hate the law firm “meter.” At Adherence, we take on risk by calculating how much we time we think an engagement is going to “cost,” and proactively offer the client a flat monthly fee. The result is that clients can set a proper budget and cap their legal/compliance expenditures. Moreover, they are less restrained to involve us with a matter due to cost.

Christy Weisner: OK, outsourcing – I get it, I love it! It sounds like Adherence is essentially a company that can serve as a fully outsourced CCO or GC (through your affiliate law firm), or can tackle projects designated by in house CCO’s or GCs. So, who are your clients and what services do they typically buy?

Jane and Saleemah: Our clients frequently fall into 2 categories: they are either companies that need to register as a hedge fund or broker-dealer (but lack a CCO) or they are an established firm where someone is overstretched by having to wear multiple “hats” (e.g. the CFO or the COO).

Christy Weisner: I’m still a lawyer, so I can’t help this next one. How did you set up the business model to divide the compliance and legal work, and steer clear of ethical rules preventing the sharing of profits with non-lawyers?

Jane and Saleemah: While Adherence isn’t a law firm, it employs primarily lawyers. Adherence doesn’t share profits with non-lawyers and compensation is paid on a project or hourly basis. To the extent that we perform work that is clearly legal (and not regulatory compliance) work, we conduct the business out of Adherence’s law firm affiliate — which is a licensed law firm with malpractice insurance (i.e., it is no different than any other law firm). But much of our work is in the “gray” area between legal and compliance. Every major organization and legal department places this line somewhere differently. For us, the key questions are based on whether we are engaged as attorneys (as Outsourced General Counsel) and if matters of privilege may be involved.

Christy Weisner: Got it, it really is a different structure. How did you conceive of Adherence?

Jane and Saleemah: Adherence came out of our belief that post-2008 and Dodd Frank, the paradigm of the financial industry had changed. At that point there were smaller financial firms handling more money, but the regulatory requirements for firms stayed the same regardless of the number of people working there. Smaller financial firms needed a way to manage the regulatory requirements that was cost efficient but wouldn’t short-change the quality of work that needed to be done.

On the flip side, we saw that there was an incredible talent pool of lawyers and seasoned compliance people out there hungry for work that would also allow flexibility in their life. So we started tapping into this “off-track” market by hunting down “mommies” and others who had excellent skills but wanted to leave a big institutional setting.

Christy Weisner: What is the most surprising thing you’ve learned since you started?

Jane and Saleemah: That fundamentally we LOVE this business. After a million collective years of working for big law firms and institutions, we are finally able to work in an environment that produces a terrific product that our clients love, to have clients that WE love, to not have to work with anyone we DON’T love, and to have an environment that focuses on the work (and the clients’ needs) but not the face time.

Christy Weisner: What advice would you give to lawyers looking to try venture out on their own?

Jane and Saleemah: Do it – but not in a way that competes with Biglaw. Go after business that law firms don’t want to — or can’t efficiently — provide. At the end of the day, low fees still won’t make an independent law firm competitive. However, providing services that law firms ignore can be the basis of a terrific business. The result is you have a business that has a market — and the Biglaw firms see you as a resource and not a competitor.


Joe-Borstein-extra-LinkedinJoe Borstein is a Global Director at Thomson Reuters’ award-winning legal outsourcing company, Pangea3, which employs over 1,000 full-time attorneys across the globe. He and his co-author Ed Sohn each spent over half a decade as associates in Biglaw and were classmates at Penn Law.

Joe manages a global team dedicated to counseling law firm and corporate clients on how to best leverage Pangea3’s full-time attorneys to improve legal results, cut costs, raise profits, and have a social life. He is a frequent speaker on global trends in the legal industry and, specifically, how law firms are leveraging those trends to become more profitable. If you are interested in entrepreneurship and the delivery of legal services, please reach out to Joe directly at joe.borstein@thomsonreuters.com.

CRM Banner